MACRO TEST 2

Hyperinflation erodes which functions of money? I. Unit of account II. Store of value III. Medium of exchange

I, II, and III

_____________ created by the government and other groups determines the legal rules that people follow and the incentives for their work.

The institutional environment

_______ measures all items within the economy, including health care, electricity, and housing.

The personal consumption expenditure deflator

Frictional unemployment

Unemployment due to the time it takes for employers to search for workers and for workers to search for jobs. Frictional unemployment exists because the process of matching workers to jobs is not instantaneous.

Structural unemployment

Unemployment that occurs because wages don't fall to bring labor demand and supply into equilibrium.

inflation rate

change in price/ price of last year x 100

Shoe‑leather costs

costs associated with using the full purchasing power of money before hyperinflation erodes it away.

Unemployment that is due to a temporary downturn in the economy is defined as:

cyclical unemployment.

Low frictional unemployment implies that it is relatively _____ to find a job and that the long-term rate of unemployment is _____.

easy; low

The costs of unemployment are _____ lost wages and output.

greater than

Someone who wants full-time work and is working part time because she hasn't found a full-time job is defined as:

involuntarily part time.

The personal consumption expenditure deflator _____ affected by substitution bias because the basket of goods is _____ just like the chained CPI.

is not; continually updated

The real interest rate is the:

nominal interest rate minus the rate of inflation.

chained CPI is continually updated

normal CPI is not

Charles has been working in his job for 20 years now and has significantly lowered his productivity. His employer would like to replace him, but current regulations make it hard to do so. This is an example of _____, as regulations make it harder to fire a bad worker.

structural unemployment

equilibrium unemployment rate

the long-run unemployment rate to which the economy tends to return.